Mandatory national licence for staffing firms in works

NEW DELHI: India is set to prescribe a new framework for staffing firms but without specifying any financial threshold, a move the industry believes could encourage unscrupulous players.

The labour ministry has firmed up plans for making a national licence mandatory for staffing firms, but without any net-worth threshold, an official told ET. The ministry is considering a rollout of the draft of the amendments to the Contract Labour Regulation and Abolition (CLRA) Act, paving the way for the new framework for staffing firms. “There is no plan for prescribing any threshold as this could keep the smaller players out of the legal framework,” the official said. At present, staffing firms can operate after making a small deposit as security with the government. These firms use the money charged from their clients to pay the salaries and the social security cover.

The existing framework mandates approvals for hiring contract workers at every location or premises and for every change in number. A single national licence will make it easier for both big and small companies to operate, besides increasing workforce formalisation.

The licence would be based on set criteria and renewed every three years. This will have the twin advantage of providing better social security for contract workers and help create more jobs in the organised sector.

“A national licence without any financial criterion means staffing firms seeking a licence would not be able to pay salaries or social security and remain sustainable,” said Suchita Dutta, executive director of the Indian Staffing Federation.

A large number of contract workers in the country operate under traditional contractors who often not only deny them minimum wages, but also pension and death and disability benefits, something the present BJP-led NDA government is keen to change.

The government and the corporate sectors employ a large number of contract workers, who now account for 55% of public sector jobs and 45% of those in the private sector. Furthermore, their number is on the rise in the country because they can be paid less than permanent workers and retrenched more easily.

About 20 lakh contract labourers are currently in the organised sector, which itself is miniscule. Out of 480 million workers in the country, just 10% are in the organised sector, depriving the vast majority of social security benefits to contract workers who are part of the unorganised sector.